Examining The Explosive Growth of Curve Finance, One of Yield Farming's Biggest Winners
Also, COMP token incentives change, 0x's Matcha launch, prediction markets heat up.
Hello Defiers! Another busy day in DeFi. Today we dive into one of the biggest winners of the yield farming boom, stablecoin-focused DEX Curve
Examining Curve’s surge to second-largest DEX by volume
COMP holders vote to change token incentives
0x launches DEX aggregator Matcha
Prediction markets space heats up with Omen and Polymarket
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Stablecoin DEX Curve Surges Amid Yield Farming Boom
As yield farming continues to push demand for stablecoins, one platform is taking the cake.
Volume on the Curve Finance decentralized exchange jumped by $213M on the week COMP distribution launched, a ~16x increase from the previous week, as farmers scrambled to get their hands on USDT to maximize their earnings.
In the past two weeks, Curve’s cumulative volume has grown over 120% to just over $550M at the time of writing from $250M on June 15th .
And there’s no signs of this slowing. With the release of a framework for the CRV governance token, yield farmers are quickly flocking to Curve to take advantage of some of DeFi’s highest APY’s and the promise of retroactive token distributions.
The hunt for CRV combined with a top trading venue for tokens which yield the highest APYs has propelled Curve to the 2nd slot amongst all DEXs, from 7th before the yield farming boom started, sitting behind Uniswap’s $142M, at $82M worth of volume in the past week according to Dune Analytics.
Besides its surging activity, another interesting aspect about Curve is its mysterious roots. The website lists no official team members and the project has no Medium or publication to reference an official launch date.
Despite this, we can deduce that the project was conceived in 2019, with NuChyper’s CTO Michael Egorov releasing the official whitepaperon November 10th of the past year. Julien Bonteloup, an early investor in the project, told The Defiant Curve has since raised a private round from known people in the industry.
Despite this amorphous, pseudo-anonymous structure, Curve has continued to ship new features and product upgrades such as adding virtually one new Curvepool per month, enhanced swap interfaces and automatic staking onramps for liquidity incentives like Synthetix.
This cadence is best highlighted by Curve’s integrations with top DEX aggregators like 1inch, Paraswap and DEX.ag in tandem with asset management partners like Zapper, Zerion and InstaDapp.
For those who have been keeping an eye on Curve, you surely remember iEarn Finance (now YEarn), a project by Andre Cronje which offers a sleek front-end to connect to Curve’s liquidity pools without having to deal with their retro interface.
Despite taking a temporary hiatus, the industry-favorite Curve extension is set to introduce new trading strategies in the coming weeks.
Curve is becoming known for its low-slippage. The protocol’s AMM is designed in such a way that assets which share similar price targets (like $1 in the case of stablecoins) benefit from flatter curves than DEXs like Uniswap.
This novel approach to mitigate slippage has fueled large order trading which rivals that of centralized exchanges like Binance - best highlighted by this trade from the Synthetix Foundation in which $2.5M of sUSD was exchanged for USDC with only $50 of slippage and $1.77 in gas.
Here’s a look at how little slippage Curve’s trading pairs incur relative to transaction depth.
Graph by Michal Herzyk - please note that transaction depth for other DEXs is not being measure in stablecoin pairs like Curve
Now, Curve is starting to expand into uncharted territory with BTC liquidity pools. With the release of the renBTC pool and the sBTC pool, users can now trade different Ethereum-based Bitcoin wrappers with minimal slippage in tandem with liquidity incentives in the form of SNX, REN, BAL and CRV tokens. More on this here.
The sBTC incentives come in tandem with the sUSD trial in which those who provide liquidity to the sUSD Curvepool are able to earn ~23% APY denominated in SNX at the time of writing.
The Road Ahead
As Curve solidifies its place in the DEX landscape, projects with stablecoins or pegged wrappers will increasingly seek to trade on Curve to incentivize liquidity.
But, Curve has been intentional about the assets it supports - as Balancer’s recent black hat attack goes to show a liquidity pool is only as strong as its weakest token.
Regardless, the new hunt to farm CRV has continued to show the power of liquidity mining, with the number of unique LPs jumping by 65% from 1,286 two weeks ago to 2,115 at the time of writing.
The TLDR is that CRV will be issued retroactively, with the protocol’s 0.04% trading fees (which have accounted for roughly $2M in earnings to date) allocated to tokenholders using an Aragon-based CurveDAO and time-weighted voting.
To stay up with Curve, be sure to follow them on Twitter. If you’re reading this, you may very well stand a chance against the influx of new farmers once the CRV distribution goes public.
COMP Users Vote to Change Token Incentives
A proposal to upgrade the distribution of COMP, Compound’s governance token, was approved on Tuesday. Once the upgrade goes live, two changes will be introduced. One is a security update that will prevent malicious players from using flash loans to manipulate markets across the system to influence the distribution of COMP. Second, and most importantly, is new incentive mechanism for liquidity providers.
Matcha is The Hot New DEX in DeFi
The 0x team just unveiled their long-awaited Matcha DEX aggregator.
Matcha is like any other Ethereum DEX, meaning that users can swap their tokens peer-to-peer while maintaining control of their assets. However, much like 1inch, Paraswap, and DEX.AG, Matcha aggregates the best prices and least slippage to trade assets on Ethereum. Think of Matcha like an Expedia or Kayak for finding the best rates when you want to trade ETH or ERC20 tokens on Ethereum.
Additionally, the design of the website is clearly inspired by the likes of Robinhood and aims to attract more traders to try DEX trading vs centralized exchanges.
In this video, DeFi Dad discusses the following:
What's different about Matcha and how to place limit orders
How to track open limit orders and cancel orders
Risks to Using Matcha
Am I getting the best rate with Matcha?
Try Matcha yourself at: https://matcha.xyz/
Check out the audits from Tail of Bits and ConsenSys Diligence here: http://help.matcha.xyz/en/articles/3952924-how-secure-is-matcha
For more DeFi tutorials like this, please subscribe to DeFi Tutorials with DeFi Dad on Youtube at https://www.youtube.com/channel/UCatItl6C7wJp9txFMbXbSTg/and follow @DeFi_Dad on Twitter at https://twitter.com/DeFi_Dad
Disclaimer & Risks: Matcha and the 0x team did not to produce this video. This is not financial advice and you should approach all DeFi applications, wallets, protocols, and tools with caution. Please be aware there is always risk in using DeFi, including technical risks (ie smart contracts hacks), financial risks (ie liquidity crises), and potentially admin risk (admin key compromise, governance vulnerabilities). Also there is risk whenever using leverage (if it's ever used), and there's risk of the dollar-peg failing in any stablecoin.
Bet on This: Prediction Markets Space Heating Up
Ethereans have been pushing for decentralized prediction markets since before Ethereum itself launched, but no platform has gained meaningful traction yet. The latest attempts to crack this use case are Omen and Polymarket.
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About the founder: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.